20 Years on: are pensioners nett payers of GST or not?

Article published 8 September 2020

20 Years on: are pensioners nett payers of GST or not?

THE GST started in July 2000. Pensioners were compensated with a 4 per cent pension supplement, indexed according to the Consumer Price Index every six months. This was presented as over-compensation, ensuring pensioners wouldn’t be worse off because of the GST.

That GST part of the pension supplement is now worth $24.20 a fortnight for single pensioners and $39.80 a fortnight combined for partnered pensioners.

The total pension supplement also includes what used to be called the Utilities Allowance, the Telephone Allowance and the Pharmaceutical Allowance.

Does the initial 4 per cent compensation still cover what a pensioner pays in GST?

For a single pensioner to pay $24.20 a fortnight in GST, she or he can spend $266.20 a fortnight on goods and services that are not GST-free. A full rate single pensioner receives $944.30 a fortnight as their overall pension payment. The difference is $678.10.

This means that if a single pensioner spends $678.10 a fortnight or more ($48.44 a day or a whacking 72 per cent of their pension) on GST-free goods and services like rent, medical and care  expenses, basic food (excluding chips and cake) and beverages (excluding alcohol), the GST supplement covers what they pay in GST. Council rates, electricity and water/wastewater charges are also GST-free.

Compensation may cover GST, but it would be a close-run thing and certainly not the over-compensation that was promised twenty years ago.

For couples on a full rate pension, a similar calculation shows that if they spend 69 per cent of their pension, or $985.80 a fortnight or more, on GST-free goods and services, the GST pension supplement covers what they pay out in GST.

If you are a pensioner, and you want to work out if you received the promised GST compensation, check your grocery and other dockets and bills for, say, three months (13 weeks). Then add up all the GST you paid. If it’s more than the compensation for that period of $157.30 (if you are single) or $258.70 (couples), then you have paid some GST.

Please let us know how GST compo is working for you.

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